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Scaling the Heights

September 07, 2003|Sallie Hofmeister

A new feature is emerging on the media landscape: NBC Universal.

At risk of being marginalized by a host of industry behemoths, NBC last week struck a tentative deal to merge its operations with Vivendi Universal's entertainment properties, thus catapulting itself into the ranks of those giants.

Critics decry the proposed marriage between the General Electric Co.-owned network and the Universal empire as another blow to media diversity. But industry observers see the union as inevitable -- the tail end of Big Media's long march toward consolidation.

One aim is clear: to reduce skyrocketing programming costs by owning both the production factory and a multitude of distribution pipelines for beaming entertainment fare into American homes.

Even Viacom Inc. Chairman Sumner Redstone -- a rival who knows a thing or two about milking a range of media assets -- begrudgingly acknowledged, "It's a rational deal for both sides."

If the deal is consummated, as is widely expected, NBC would enjoy many of the same strategic advantages as the dominant media conglomerates. It would combine its own stable of TV properties with a legendary movie studio, a hit-making television production operation, a well-stocked TV and film library, and some cable channels.

Meanwhile, media watchers are keeping an eye on the horizon. Smaller studios that lack key distribution outlets, such as Metro-Goldwyn-Mayer Inc., Sony Corp. and DreamWorks SKG, may feel increasing pressure to find a dance partner.

Said Derek Baine, a market analyst at Kagan World Media in Carmel, Calif.: "It makes you wonder what's going to happen."

-- Sallie Hofmeister

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